Care homes in Scotland could face a financial tipping point in the new year as uncertainty over government covid-19 support, higher costs and lower numbers of residents begin to bite.

Occupancy levels in homes for older adults have fallen sharply over the pandemic, raising concerns about the ability of some businesses to stay afloat as providers can no longer claim for under-occupancy payments previously offered by the government.

Meanwhile insurance premiums have rocketed by as much 100% – with some insurers refusing to take on care homes at all – while a fund to reimburse operators for PPE is set to close in March.

A Scottish government spokesperson said decisions about financial support would be taken “in due course”.

Sources in the sector told healthandcare.scot they had struggled to get government officials to grasp the true extent of the looming problems.

Robert Kilgour, chairman of Renaissance Care which runs 15 care homes, said a trickle of closures could become a “tsunami” if government funding for residents does not increase in the new year.

Scottish Care’s Karen Hedge said a failure by ministers  to “engage effectively”  meant well-intentioned funding had not reached the frontline. She added that many homes, particularly smaller ones, were at risk of closing without a “significant” increase in support.  

Nearly 30 private and not for profit care homes closed between 2019 and 2021 according to figures from Public Health Scotland published earlier this month

This year’s Scottish care home census revealed the single biggest yearly drop in occupancy since publication began in 2011. Average levels dropped five percentage points to 82%, from 87% in 2019 (the survey did not take place in 2020 because of the pandemic).

“There’ll be no return to the pre-covid situation, January 2020 or before,” Robert Kilgour told healthandcare.scot. "We’re all going to have to get used to lower occupancy and higher costs, which obviously lead to a lower margin in businesses which will be struggling to earn the money to pay the staff and reinvest in new furniture, equipment et cetera.”

Against this backdrop, eligibility for government support has been tightened up. Cash for infection control and PPE is only guaranteed until the end of March 2022. Separately, funding to compensate homes with lower numbers of residents – which sources said had kept providers afloat during the pandemic – is no longer available except in ‘exceptional circumstances’.

In October, Health and Care Secretary Humza Yousaf announced the government would fund a payrise for care workers but delays allocating the cash to employers left some providers having to meet the costs themselves. The Scottish government told healthandcare.scot it “would encourage health and social care partners to continue to work closely with providers to ensure they receive the financial support they are entitled to”.

There are also increasing fears that a parallel recruitment drive in the health service, offering better pay, is diverting staff from care services.

Karen Hedge, National Director at Scottish Care, said: “What should have been a good news story of a rise in the wage for frontline carers, has been nothing short of a slap in the face to qualified and registered professionals who have given their all over these last 20 months as they were benchmarked against the NHS equivalent of an unskilled domestic role.”

Scottish Care has told its members the sector needs a “dramatic resource allocation” in the upcoming National Care Home Contract (NCHC), which the organisation negotiates annually with local authority body COSLA.

The NCHC determines the rates a care home gets for publicly-funded residents, who make up around seven in ten places. Homes have complained the fees do not cover what it actually costs to provide high-quality care, meaning privately-funded residents pay higher charges to effectively subsidise public places.

Mr Kilgour believes April, when the new contract goes into effect, could be the tipping point for many operators.

“There are some care homes in Scotland that are going to close because of [pay funding] increases in December not getting paid until February. There are others I know that are going to hang on until April hoping for a decent increase in the NCHC.

“I suspect from what I hear there are a few – just a handful – that are likely to close between now and April… but if the Scottish government are not going to make a decent settlement, then I worry that the trickle of closures between now and April could become a tsunami, as people say ‘enough’s enough’.

“We need to get paid closer to the true cost of care".

Karen Hedge said the NCHC had initially brought stability by removing competition between areas, but the shift to low rates had pushed smaller homes out of the market:

“Over 70% of people who live in care homes are rightly funded by the government, but the amount that this equates to is around £4.05 per hour. This is less than half what the local authority is paid to deliver the same service.

"It risks putting care homes in a financially difficult position, having to maintain the high standards of quality and complex care which residents deserve, at the same time as offering Fair Work terms and conditions to their staff, and maintaining building conditions etc.

“The small family-run care homes which offer the majority of care and support, particularly in rural areas of Scotland, feel this the most, and many have told us they risk closure if they do not see a significant rise to the NCHC rate. This would be a huge loss to local communities.”

Councillor Stuart Currie, COSLA’s Health and Social Care Spokesperson said:’ “We are in the midst of on-going negotiations in relation to the NCHC. 

“COSLA has never and will never conduct negotiations in public – but nobody can possibly have missed the financial context that Scottish local government will have to work within next year given the draft Scottish government budget.

Asked about the NCHC, the Scottish government said they were not a contractual party to the agreement. A spokesperson added: “A decision will be taken in due course about all financial support measures for adult social care providers post-March.

“The financial support for social care provider arrangements include funding for infection prevention & control and PPE, and have demonstrated our commitment to supporting the sustainability and resilience of the social care sector.

“We are also working with NHS National Services Scotland on how best to supply PPE to social care providers sustainably over the longer term.”

Read more: Care worker pay rise hit by funding delays; Budget: Major increase in social care spending; Care payrise: ‘Devil will be in the detail’

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